Taxes Done, Advice, and Good News Bad News
Got my paperwork from the accountant today. Good news is it’s all done, all I need to do is go to the bank and give them money. Bad news of course is that when she gave me her estimates for how much I’d have to pay she forgot to factor in GST, so I’m in with the government for a couple of thousand more than I thought I was. Good news is though, that the money is there and already earmarked for this, I just am a bit shorter on the “extra” money that I figured I’d have. Of course, I’m still ok.
Not to my friends who have their own business… take my advice, given to me by either my parents, accountant, financial advisor from the SEP, or Dana…. put 20% of everything you make into a separate account in the bank, probably best would be a savings account under the same account number, so the total of the account matches up with your books and you don’t have to worry about accounting for where the money is going or anything.
I did this by creating a separate savings account under the same account, so all my main business input and output was done through the checking account, but after I was paid I’d move the money around online. When I get my monthly bank statement I just add up the totals for the two accounts and that’ll match up with what is in your books, as your books don’t “know” that you have two accounts. Works great.
This 20% seems high at first, but at the end of the year, when the tax man comes, you will be thankful that it’s there. Not only that, but because you’re taking it off the top of your income, chances are you’ll have some left over after the tax man leaves because of writeoffs and whatnot.
Believe me it sucks to see big chunks of cash “disappear” from your income, but when the end of the year rolls around and you get a big ass bill (like I did… see what I get for having a good year?), it’s much worse not to have that money!
Another thing to consider is if you do do well, and accumulate a couple of thousand in this “extra” account, put it in a short term, low risk RRSP account, mutual fund, or something, as you’re probably going to be getting about 0.0001% interest on a normal business account. Just remember that if you lose the money through high risk, short term investment, that’s a Bad Thing™, so put it somewhere that has no penalty for pulling it out, and guarentees that you won’t lose it. Or leave it there earning low interest, but being safe 🙂